Military-pensions hearing raises alarm on cost of pay

The uproar last month over changes to military pensions may have worked – senators from both parties indicated Tuesday they want to repeal the measure and put money back into the pockets of working-age retirees. But another message came out of the Senate Armed Services Committee hearing, too: a warning that military pay and benefits can’t continue growing the way they have for the past decade.

The hearing was supposed to focus on cuts to military pensions that were included in last month’s budget deal, but it turned into a broader discussion about military compensation and benefits.

As part of a budget agreement approved in December, Congress agreed to save $6 billion by reducing the cost-of-living increases for younger veterans by 1 percent annually, starting in late 2015. When a retiree reached age 62, the increase would be restored.

Veterans groups quickly mobilized to fight the change. Lawmakers said at the time that they didn’t want to risk the larger budget deal by tampering with the pension issue and would seek to fix it later.

Most committee members, including Sen. Tim Kaine of Virginia, restated their desire Tuesday to repeal the pension reduction.

Committee Chairman Carl Levin, a Michigan Democrat, said the reduction “is wrong because it targets a single group, military retirees, to help address the budget problems of the federal government as a whole.”

Veterans groups urged the panel to undo the change now, saying it breaks a promise to enlisted personnel and veterans that their retirement benefits won’t change.

“I will tell you I never worried about retirement. It was just there,” said Retired Army Gen. Gordon Sullivan, who heads the Association of the United States Army. But now there’s doubts among service members, he said.

They are “the last people in the world you want worried about that kind of stuff, those who are out there, climbing into helicopters and airplanes and ships and jumping out of airplanes in the middle of the night,” Sullivan said.

John Tilelli, a leader of the Military Officers Association of America, estimated the change could cost a retired chief petty officer a total of $83,000 by the time he or she turns 62.

While legislators agree they want to restore the cost-of-living adjustment, there’s no clear agreement on how to replace the $6 billion in savings it would generate. Kaine and Sen. Mark Warner of Virginia have proposed closing some tax loopholes, while others have proposed a crackdown on tax cheats or an end to Saturday mail delivery to raise the money.

The Pentagon made it clear to senators that the pension issue is just the tip of the iceberg.

Christine Fox, acting deputy defense secretary, told the senators that rising personnel costs must be reined in because “we are unlikely to see defense budgets rise substantially for some time.”

Paychecks won’t be reduced for current members of the military, but the Pentagon can’t continue at its current pace with raises and benefit increases, she said.

“We are where we are today with respect to personnel costs because of good intentions – from a desire to make up previous gaps between military and private-sector compensation, to the needs of recruiting and retaining a top-notch force during a decade-plus of war, to an expression of the nation’s gratitude for the sacrifices of our military members and their families,” Fox said. “As a result, inflation-adjusted pay and benefit costs are 40 percent higher than in 2011, even though the active force today is only slightly larger.”

She noted that the department’s health care costs more than doubled between 2001 to 2013, rising to almost $50 billion from less than $20 billion. Housing allowances also are increasing faster than inflation, she said.

Some senators seemed reluctant to accept Fox’s premise.

“It doesn’t seem prudent to me for you to say the first thing you’ve got to do is cut soldiers’ pay and benefits when you don’t know if you can run the place a little bit better,” said Sen. Joe Manchin, a West Virginia Democrat. “If the Pentagon fails to convince Congress that changes to the soldier retirement benefits are the best option for cost saving, what other courses of action will you all recommend? Because we hear of just the unbelievable waste and fraud that goes on in the Pentagon.”

But work on the bigger issue already has begun. Possible changes to compensation and benefits are being examined by the Military Compensation and Retirement Modernization Commission. The panel, set up by Congress, is expected to deliver its recommendations in February 2015.

Sullivan, a former Army chief of staff, suggested that lawmakers consider carefully how changes in pay and benefits might affect the military’s ability to attract and keep people.

“Today’s soldiers are tomorrow’s retirees, and they are watching and they will speak,” he said. “And the current retirees… many of whom are combat veterans themselves, will influence in some way recruits or potential recruits.”